As the Sovereign Gold Bonds 2023-24 (Series I) scheme has opened for subscription a couple of days ago (June 19), investors have many questions in their mind related to the investment, returns and other formalities. Investors must know that SGBs are a safe, convenient, and tax-efficient way to invest in gold. If you are looking for a way to add gold to your investment portfolio, SGBs are a good option to consider.

The SGB scheme is a government-backed investment product that allows investors to buy gold without having to physically hold it. SGBs are denominated in grams of gold, and they can be bought and sold through banks, post offices, and other participating institutions.

There are several advantages to investing in SGBs. First, they offer a safe and secure way to invest in gold. SGBs are backed by the government of India, so you can be sure that you will get your money back if the issuer defaults.

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Second, SGBs are a convenient way to invest in gold. You can buy and sell SGBs through a variety of channels, and you do not have to worry about storing or insuring physical gold.

Third, SGBs offer a fixed interest rate. This means that you will earn a guaranteed return on your investment, even if the price of gold falls.

Fourth, SGBs offer tax benefits. If you hold SGBs for at least 3 years, you will be exempt from capital gains tax.

Adhil Shetty, CEO, Bankbazaar.com, says, “The best way to invest in gold depends on your investment goals. If you are looking for an investment with low costs and the security of being backed by the government, then SGBs may be a good option for you.”

“What is an attractive proposition is that the total return in SGB includes the appreciation in the gold price as well as the 2.5% interest paid by the RBI. This could be an attractive investment option for risk-averse investors,” Shetty adds.

Here are some of the key features of SGBs:

* SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Government of India.

* They are denominated in grams of gold.

* The minimum investment is 1 gram and Maximum is 4KG.

* The interest rate is fixed at 2.5% per annum.

* The issue price of the bond during the subscription period shall be Rs 5,926 per gram.

* The Government of India in consultation with the Reserve Bank of India has decided to allow discount of Rs 50 per gram from the issue price to those investors who apply online and the payment is made through digital mode.

* The lock-in period is 5 years.

* They are exempt from capital gains tax, if held for at least 3 years.

Here are some of the benefits of investing in SGBs:

Safe and secure investment: SGBs are backed by the government of India. So, you can be sure that you will get your money back if the issuer defaults.

Convenient investment: You can buy and sell SGBs through a variety of channels, and you do not have to worry about storing or insuring physical gold.

Fixed interest rate: You will earn a guaranteed return on your investment, even if the price of gold falls.

Tax benefits: If you hold SGBs for at least 3 years, you will be exempt from capital gains tax.

Risks associated with investing in SGBs:

The price of gold can go down as well as up.

There is a 5-year lock-in period, so you cannot sell your SGBs before then.

The interest rate on SGBs is fixed, so you will not benefit if the interest rates in the economy rise.

Overall, SGBs are a good investment option for investors who are looking for a safe, convenient, and tax-efficient way to invest in gold. However, it is important to understand the risks associated with investing in SGBs before you make an investment.